Wayne Co. v. Newo, Inc.

• Decision Date: 15 June 1962
• Docket Number: No. A--579,A--579
• Citation: 182 A.2d 369,75 N.J.Super. 100
• Parties: The WAYNE COMPANY, Inc., a New Jersey corporation, Plaintiff-Respondent, v. NEWO, INC., a New Jersey corporation, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 100

75 N.J.Super. 100

182 A.2d 369

The WAYNE COMPANY, Inc., a New Jersey corporation, Plaintiff-Respondent, v. NEWO, INC., a New Jersey corporation, Defendant-Appellant.

No. A--579.

Superior Court of New Jersey

Appellate Division.

Argued June 11, 1962.

Decided June 15, 1962.

Edward R. McGlynn, Newark, for appellant (McGlynn, Stein & McGlynn, Newark, attorneys).

Michael J. Monaghan, Jr., Teaneck, for respondent (Monaghan & Monaghan, Teaneck, attorneys).

Before Judges GOLDMANN, FREUND and FOLEY.

The opinion of the court was delivered by

GOLDMANN, S.J.A.D.

This is an appeal by defendant lessee from an interlocutory order of the Chancery Division in which it was held that the trial of the condemnation action would be limited to the question of the leasehold damages it had suffered, plus the stipulated sum of prepaid rent. We granted leave to appeal in order to obviate the necessity of an extended trial of the parties' respective contentions, by resolving just what elements of damage might properly be considered at the ultimate hearing.

Plaintiff is the owner of real property located on the west side of State Highway No. 4 in Fort Lee, Bergen County. In 1954 negotiations between the parties resulted in the execution of a lease on October 18 of that year. The lease was for an initial 15-year term, and was to begin upon plaintiff's completion of a restaurant building to be used by defendant. The building was completed on or about August 1, 1955. Meanwhile, on June 1, 1955, defendant subleased to the Kened Company, plaintiff consenting thereto in writing.

Early in 1960 the New Jersey State Highway Department notified both plaintiff and defendant that the land and improvements in question would be taken by the State as part of its road program involving the building of new approaches in connection with the double-decking of the George Washington Bridge. On February 17, 1961 the Department instituted a condemnation action naming both plaintiff and defendant as parties. Immediate possession was sought, with the result that the premises were surrendered, the State accepting possession of the land and building on March 23, 1961.

Thereafter the Bergen County Law Division judge on April 14, 1961 appointed commissioners to hear the condemnation and to report by July 14 following. In the meantime the State Highway Department sought to effect a settlement. Such agreement was reached while the condemnation action was pending. The Department agreed to pay plaintiff $160,000 for the land and improvements taken and for the damage caused to its remaining vacant land. No further steps were taken in the condemnation action. We are informed that the State has issued its check, payable to plaintiff, which is being held by the State's closing agent pending the obtaining of a release from defendant tenant.

Since the parties were in dispute as to the distribution of the $160,000, it was agreed that an action be instituted on the basis of N.J.S.A. 20:1--15. That statute deals with a situation where a condemning authority has paid into court the amount involved. However, neither party raised any question as to the jurisdiction of the Chancery Division to determine the dispute between them.

Plaintiff, by its complaint in the Chancery Division, sought judgment requiring defendant to deliver a release of the lease. Defendant, by its amended answer, claimed that under section 16(c) of its lease, hereinafter set forth, it was entitled to an apportionment of the $160,000, comprising four items totalling $127,632.55, as follows '(1) Rent prepaid by the Kened Company, $38.557.31.

(2) The market value of the unexpired term of the leasehold, from March 23, 1961 to August 1, 1970, $35,000.

(3) The depreciated value of the fixtures, less salvage, $19,075.24.

(4) Loss of profits for the remainder of the term, $35,000.'

Plaintiffs concedes its obligation to pay defendant the prepaid rent, and that defendant should be permitted to offer proof on the question of leasehold damage suffered.

Upon pretrial of the matter, it was agreed that the Chancery Division judge would determine the purely legal question arising out of paragraph 16 of the lease insofar as defendant's claims for the depreciated value of its fixtures and loss of profits were concerned. The trial court, in its written opinion, held that paragraph 16 did not entitle defendant to prove either of these items, and that the plenary trial would be limited to the question of its leasehold damages which, if established, would, together with the stipulated sum of prepaid rent, represent defendant's interest in the $160,000 condemnation settlement. An accordant interlocutory order was entered, and this appeal followed.

Defendant recognizes that in a 'conventional dispute' between a landlord and tenant concerning their respective interests in a strict condemnation award, the settled rule is that the tenant's recoverable damage, if any, is ascertained and determined fundamentally by a comparison of the fair value of his leasehold interest and the rent reserved. N.J. Highway Authority v. J. & F. Holding Co., 40 N.J.Super. 309, 123 A.2d 25 (App.Div.1956); Newark v. Cook, 99 N.J.Eq. 527, 133 A. 875 (Ch.1926), affirmed on opinion, 100 N.J.Eq. 581, 135 A. 915 (E. & A. 1927). However, it contends that the general rule does not apply in this case because the parties in their lease contractually provided otherwise. The suggestion is advanced that in applying the general rule of apportionment between landlord and tenant, the Chancery Division judge disregarded the parties' contractual undertaking. Such is not the case, for the opinion he filed clearly shows that he based his decision on the language of paragraph 16.

That paragraph provides:

'If the entire demised premises shall be taken or appropriated by virtue of eminent domain or be condemned for any public or quasi-public use, this lease shall terminate ipso-facto, but such a termination shall not affect the Lessee's right to recover the apportionment of damages herein provided. * * *

The Lessee assigns to the Lessor All damages recoverable by the Lessee from the public or private body (herein designated as the taking authority) on account of any taking, appropriation or injury of or to the whole or any part of the demised premises and waives the Lessee's right if any, to intervene as a party to any proceedings commenced by the Lessor to recover such damages, and in consideration thereof:

(a) The Lessor agrees not to settle any claim for Such damages against the taking authority, without the written approval of the Lessee, which shall not unreasonably be withheld.

(b) The Lessor shall (unless the claim is settled as herein provided) prosecute proceedings for the recovery of Such damages with due diligence and so as not to lose the benefit of the same. The Lessee may at its own expense designate an Attorney to act jointly with the Attorneys designated by the Lessor in the prosecution of said proceedings in the name and on behalf of the Lessor.

(c) All amounts which may be recovered by the Lessor for Such damages from the taking authority (less any reasonable cost incurred by the Lessor for Attorneys and experts' fees in connection with the same) whether by settlement, litigation or otherwise shall be apportioned between the Lessor and the Lessee in proportion to their several interests and to the damages sustained by them, respectively. In ascertaining the Lessee's interest and the damage sustained by the Lessee the term of this lease shall...